Enhancing Firm Sustainability Through Governance
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Enhancing Firm Sustainability Through Governance

The Relational Corporate Governance Approach

Francesco de Zwart

This important book presents a fresh perspective on corporate governance and how the relationship between governance mechanisms, processes and variables should be understood through a new unifying theory: the relational corporate governance approach. The approach acts as a tool for analysing the governance health of individual companies and suggests the actions required to remedy sub-optimal governance arrangements. A wide selection of articles, empirical studies and literature have been translated into an original theory which complements existing law and economics models of the firm.
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Chapter 5: Key Field No 2: ‘Autopsies’ of the Enron and Hastie corporate collapses

Francesco de Zwart


The firm collapsed for the most mundane of reasons – its managers suffered the behavioral biases of successful entrepreneurs. They overemphasized the upside and lacked patience. They pursued heroic short term growth numbers that their business plan could not deliver. That pursuit of immediate shareholder value caused them to become risk prone, engaging in levered speculation, earnings manipulation, and concealment of critical information. They were rogues to be sure, but the self regulatory system nevertheless is deeply implicated in their company’s failure. Enron’s collapse reminds us that our corporate governance system takes some significant risks in the name of encouraging innovation and entrepreneurship and economizing on enforcement costs. William W Bratton on Enron’s demise.

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